The city of Boulder is considering what its energy future will look like. The goal it to acquire "clean, local and reliable" energy in the future, and one voter-approved option is to start a municipal utility. For more information on the history of this decision, click here.

Info: Study sessions are open to the public, but there is no public comment period. To see the complete Boulder 2015 budget, go to bouldercolorado.gov.

Next steps: Sept. 23: Second study session, if necessary; Oct. 7: Public hearing and first reading; Oct. 21: Public hearing and second reading

After years of operating in a "fiscally constrained" mode, Boulder plans to hire dozens of new employees, borrow $4 million from general-fund reserves for the new municipal utility, and embark on sewer infrastructure improvements that officials say will see 90 years of work condensed into less than 20.

Released Tuesday, Boulder's proposed 2015 budget calls for $316.8 million in spending — a 17.5 percent increase from 2014.

Eighty percent of that increase will come from increased capital spending and other one-time expenditures from savings in departments including Utilities, Parks and Recreation and Open Space and Mountain Parks.

Within the overall 2015 budget, the proposed general fund includes $128.3 million — a 10.9 percent increase over last year — with roughly two-thirds of that being one-time expenses.

That one-time spending includes roughly $6.9 million set aside to pay for costs associated with creating a municipal electric utility.

The Boulder City Council will hold a study session on the proposed budget Sept. 9.

Municipal utility spending

Boulder gets roughly $2 million a year from the utility occupation tax toward the municipalization effort after voters approved a tax increase in 2011 specifically for that purpose.

In 2013 and 2014, the city put another $300,000 from the general fund into the municipalization effort.

Now the city is proposing borrowing $4 million from general fund reserves to be paid back with utility occupation tax revenue from 2016 and 2017.

The budget also calls for $712,877 in current general fund spending on municipalization.

Boulder Chief Financial Officer Bob Eichem said the utility will eventually pay back all the money used from the general fund, though there is not currently a plan in place to do so.

City Manager Jane Brautigam said Boulder has an executive team working on the municipalization issue that keeps a close eye on legal progress and spending. If it ever seems that continuing down the path toward a city-owned electric utility "is to the detriment of the city," Brautigam will take that issue to the City Council.

But the spending proposed in the 2015 budget gets the city closer to its goals of operating a utility that gets more power from renewable energy while investing more in reliability and innovation, Brautigam said.

"We can't do nothing because a day will likely come when we own this utility, and we need to be prepared," she said.

City spokeswoman Sarah Huntley said it's important to put the current spending in the context of an electric utility's revenues.

Modeling done last year put the municipal utility's gross revenue at around $170 million a year, of which $10 million will be available for community priorities. Those include paying back the general fund, after the utility pays for power, operating expenses, debt service, reserves and a 4 percent payment to make up for the lost franchise fee with Xcel Energy.

But until the utility starts collecting revenue from customers, which city officials believe will occur in late 2016 or early 2017, the utility occupation tax and the general fund are the only sources of revenue.

Huntley said the spending in the 2015 budget reflects expenses that the city knows about now. Officials working on the utility transition expect that there will be additional startup costs that will need to be funded in other ways, she said.

Boulder Mayor Matt Appelbaum said he does have some questions about how that money is being allocated. He doesn't think the city is spending "too much" on municipalization, But he wonders about the timing of the spending.

"I fully understand that we need to plan for what we believe will be a transition, but there is a question about how far out in advance we need to get," he said.

Post-flood wastewater improvements

The 2015 budget also calls for significant investments in water, sewer and stormwater infrastructure, with corresponding rate increases to pay for those investments, in the aftermath of last year's flooding.

The city spends about $500,000 a year to line old clay pipes to reduce the amount of groundwater that gets into the sewer system during large rain events. At that rate, the city would line all its clay pipes in about 90 years.

After hundreds of Boulder residents experienced sewer back-ups during the flood, there has been pressure to line pipes and make other infrastructure improvements at a faster rate.

In response to that pressure, the utilities department has revised its recommendation several times.

Currently, the recommendation is for a 5 percent increase in water rates, a 30 percent increase in sewer rates and a 75 percent increase in stormwater management rates. That would raise average residential bills by about $15 a month, though commercial bills could go up much more, depending on the kind of business.

The proposed sewer rate increase would produce an additional $4.6 million in annual revenue and allow the city to line its clay pipes in about 16 years, with the most vulnerable, worst-rated sections being rehabilitated in about eight years.

The utility also plans to rehabilitate large interceptor lines that were found to be seriously degraded, develop a program to deal with sump pumps illegally discharging into the sewer system and other "private impacts," hire a person to focus on issues related to irrigation ditches and provide more preventative maintenance.

Jeff Arthur, Boulder's director of public works for utilities, said previous investments in the system have focused on meeting regulatory requirements, especially around water quality. But now the utility has an opportunity to respond to public demand for improved service.

"There seems to be a lot of community support for enhancing that level of service," he said.

Appelbaum said there is no "right" answer to utility rates.

"We recognize that with climate change, the likelihood of various events and their magnitude has certainly increased," he said, referring to flooding and other extreme events. "The plan needs to reflect that better understanding that we have. That said, you do need to balance that against the cost to the community."

Additional city staffing

The city also is looking at adding staff across city departments, from parks maintenance crews to an analyst for the police department to an additional city prosecutor to a coordinator for University Hill reinvestment efforts.

Of the 47.6 new full-time equivalents in the 2015 proposed budget, 15 are fixed-term, temporary positions, reflecting a long-standing city policy of using one-time revenues for one-time expenses and ongoing revenues for ongoing expenses.

Eichem, the city's chief financial officer, said the hiring returns the city to staffing levels it hasn't seen since 2002.

Boulder has cut staff, left positions open and looked for ways to streamline its process, but now the city is at a point where more people are needed to meet the level of service residents and council members want to see, Eichem said.

And revenues have finally recovered enough from the recession that hiring more people is sustainable, Eichem said.

"There is enough stability in the revenue to take this step," Eichem said.

The budget calls for a reserve of 14 percent and for the $16 million spent last year and this year out of reserves to deal with flood response to be repaid over the next two years, Eichem said.

The capital budget reflects both ongoing flood recovery efforts and a new 0.15 percent transportation sales tax approved by voters in 2013.

The city is using that tax revenue to leverage state and federal grant money, as with the $5.4 million underpass at Baseline Road between Broadway and 27th Way. That project will be started this fall and finished in late 2015.

Ballot language:
In November, Boulder voters narrowly approved two ballot issues related to starting a municipal utility: 2B and 2C. You can read the full text of the ballot language on the city's website.

Issue 2B asked voters to increase the existing utility occupation tax by up to $1.9 million a year. The money from the tax, which will be collected from customers by Xcel Energy, will be used by the city to cover the costs of moving forward with forming a municipal utility, such as more studies and legal fees.

Issue 2C asked voters for permission to actually form a municipal utility. The language allows the city to sell the necessary bonds to take over the current system from Xcel, but it states that the city may only move forward with forming a municipal utility if it can start the utility with rates that are the same or cheaper than Xcel's.

Helpful Links:City of Boulder: This is where the city is aggregating all of its documents, meeting information and updates on Boulder s energy future: bouldercolorado.gov/energyfuture

RenewablesYes: This website is run by the group of volunteers that lobbied local voters to pass a utility occupation tax in November to replace the expiring franchise fee from Xcel Energy. Now, the group is advocating for the city to secure a cleaner, more local energy supply. renewablesyes.org

Xcel Energy: Xcel is the largest utility in Colorado, and it currently provides electricity to Boulder. The city s 20-year franchise agreement with Xcel expired at the end of 2010. xcelenergy.com

Boulder Smart Energy Coalition: A citizen group that supports the city's general energy goals but has concerns about the risks involved with starting a municipal utility. bouldersec.com

SmartGridCity: Xcel Energy has installed a smart grid in Boulder. This web site provides more information on that initiative. smartgridcity.xcelenergy.com

Colorado Association of Municipal Utilities: This Colorado Springs-based group represents the state s 29 municipal utilities, which include utilities based in Lyons and Longmont. coloradopublicpower.org